IDEAS home Printed from https://ideas.repec.org/a/vrs/ecothe/v62y2024i3p389-412n1007.html
   My bibliography  Save this article

Impact of Intellectual Capital Efficiency on Profitability: The Case of Information Technology Companies on the NYSE

Author

Listed:
  • Milenović Jovana

    (University of Niš, Faculty of Economics, Republic of Serbia)

  • Bonić Ljiljana

    (University of Niš, Faculty of Economics, Republic of Serbia)

  • Krstić Bojan

    (University of Niš, Faculty of Economics, Republic of Serbia)

Abstract

Intellectual capital (IC) contributes to the creation of benefits for companies regarding the generation of competitive advantages, as well as the increase of the economic results (revenue and earnings), economic efficiency (labour productivity and profitability) and the value of company. Total IC consists of two main segments: a) the visible IC, recognised and disclosed on the assets side of balance sheet - intangible assets, and b) the invisible IC, undisclosed on the assets side of balance sheet because it doesn’t fulfil the defined conditions for accounting the recognition and disclosure. As a category in accounting theory, the first segment of total IC is the IC invested in intangible assets. The second segment of total IC is actually the IC itself that is in intellectual capital theory marked as a set of human, structural and relational capital. Starting with the structure of total IC, the aim of this study is the examination of influence of the efficiency of total IC and its elements (visible and invisible) on profitability of companies on the New York Stock Exchange (NYSE). The research is based on the sample of 63 IT companies which are selected according to S&P 500 Information Technology list. The analysis covers the period from 2010 to 2022, and the regression analysis is used for these reasons. Independent variables are following: the efficiency of total IC (EIC),the efficiency of IC which is undisclosed in balanced sheet (E∆IC) and the efficiency in the use of intangible assets (Eia), as well as its elements (the efficiency of goodwill (Eg), the efficiency in use of the intangible assets contained in customer relationships (Ecr), the efficiency in the use of internally generated intangible assets (Eiia), and the efficiency in use of others intangible assets (Eoia). A dependent variable is a profitability of IT companies, which is measured by return on assets (ROA) as a profitability indicator. The research results pointed out that there is a positive, statistically relevant influence of efficiency of EIC and elements of Eia (as independent variables) on a dependent variable – ROA. Conducted research points out the relevance of efficiency of the usage of total IC and all its elements for accomplishing a targeted profitability of IT companies, and, at the same time, confirms the usefulness and validity of the implementation of the EIC methodology (Krstić & Bonić, 2016) in IT companies for the measurement of the efficiency of total IC, as well as its elements.

Suggested Citation

  • Milenović Jovana & Bonić Ljiljana & Krstić Bojan, 2024. "Impact of Intellectual Capital Efficiency on Profitability: The Case of Information Technology Companies on the NYSE," Economic Themes, Sciendo, vol. 62(3), pages 389-412.
    • Handle: RePEc:vrs:ecothe:v:62:y:2024:i:3:p:389-412:n:1007
    DOI: 10.2478/ethemes-2024-0021
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/ethemes-2024-0021
    Download Restriction: no
    File URL: https://libkey.io/10.2478/ethemes-2024-0021?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Abdifatah Ahmed Haji & Nazli Anum Mohd Ghazali, 2018. "The role of intangible assets and liabilities in firm performance: empirical evidence," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 19(1), pages 42-59, February.
    2. Kent Daniel & Sheridan Titman, 2006. "Market Reactions to Tangible and Intangible Information," Journal of Finance, American Finance Association, vol. 61(4), pages 1605-1643, August.
    3. Chaoshin Chiao, 2001. "The relationship between R&D and physical investment of firms in science-based industries," Applied Economics, Taylor & Francis Journals, vol. 33(1), pages 23-35.
    4. Wen-Hsin Hsu & Yao-Ling Chang, 2011. "Intellectual capital and analyst forecast: evidence from the high-tech industry in Taiwan," Applied Financial Economics, Taylor & Francis Journals, vol. 21(15), pages 1135-1143.
    5. Hossein Sharifi Ranani & Zivar Bijani, 2014. "The Impact of Intellectual Capital on the Financial Performance of Listed Companies in Tehran Stock Exchange," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(1), pages 119-127, January.
    6. Yaghoob Pouryousef Nassari & Seyed Ahmad Mosavi Nasab, 2014. "Analysis of the effects of intangible assets on corporate financial value," International Journal of Learning and Intellectual Capital, Inderscience Enterprises Ltd, vol. 11(4), pages 273-285.
    7. Petrović Bojan & Krstić Bojan & Rađenović Tamara & Jovanović Marija & Vujatović Milica Jovanović, 2023. "Does The Efficient Use of Visible Intellectual Capital Determine the Profitability in the Automotive Industry?," Economic Themes, Sciendo, vol. 61(4), pages 515-539, December.
    8. Hanran Li & Wenshu Wang, 2014. "Impact of Intangible Assets on Profitability of Hong Kong Listed Information Technology Companies," Business and Economic Research, Macrothink Institute, vol. 4(2), pages 98-113, December.
    9. Radiojecic, Tamara & Krstic, Bojan, 2017. "Intellectual Capital in the Theory of the Firm," Ekonomika, Journal for Economic Theory and Practice and Social Issues, Society of Economists Ekonomika, Nis, Serbia, vol. 63(4), December.
    10. Daniel Zéghal & Anis Maaloul, 2011. "The accounting treatment of intangibles – A critical review of the literature," Accounting Forum, Taylor & Francis Journals, vol. 35(4), pages 262-274, December.
    11. Peters, Ryan H. & Taylor, Lucian A., 2017. "Intangible capital and the investment-q relation," Journal of Financial Economics, Elsevier, vol. 123(2), pages 251-272.
    12. Filipe Sardo & Z¨¦lia Serrasqueiro, 2017. "Intellectual Capital and Firms¡¯ Financial Performance: A European Empirical Study????," Business and Economic Research, Macrothink Institute, vol. 7(2), pages 1-18, December.
    13. Liu, Chih-Hsing, 2017. "The relationships among intellectual capital, social capital, and performance - The moderating role of business ties and environmental uncertainty," Tourism Management, Elsevier, vol. 61(C), pages 553-561.
    14. repec:eme:jaar00:jaar-12-2015-0108 is not listed on IDEAS
    15. Zéghal, Daniel & Maaloul, Anis, 2011. "The accounting treatment of intangibles – A critical review of the literature," Accounting forum, Elsevier, vol. 35(4), pages 262-274.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Coluccia, Daniela & Dabić, Marina & Del Giudice, Manlio & Fontana, Stefano & Solimene, Silvia, 2020. "R&D innovation indicator and its effects on the market. An empirical assessment from a financial perspective," Journal of Business Research, Elsevier, vol. 119(C), pages 259-271.
    2. Anna Maria Biscotti & Eugenio D?Amico & Sabato Vinci, 2019. "The effectiveness of intellectual capital disclosure in market assessments of corporate value creation," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2019(1), pages 5-35.
    3. Stephen Penman, 2021. "Accounting for Risk," Foundations and Trends(R) in Accounting, now publishers, vol. 15(4), pages 373-507, November.
    4. repec:osf:socarx:kvp2f_v1 is not listed on IDEAS
    5. Dyhdalewicz Anna & Widelska Urszula, 2017. "Accouting and marketing dimensions of innovations," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 13(2), pages 1-13, December.
    6. Guowei Li & Zhe Luo & Muhammad Anwar & Yuqiu Lu & Xiantao Wang & Xuening Liu, 2020. "Intellectual capital and the efficiency of SMEs in the transition economy China; Do financial resources strengthen the routes?," PLOS ONE, Public Library of Science, vol. 15(7), pages 1-25, July.
    7. Li, Qing & Wu, Yanrui, 2020. "Intangible capital, ICT and sector growth in China," Telecommunications Policy, Elsevier, vol. 44(1).
    8. Michael Ewens & Ryan H. Peters & Sean Wang, 2025. "Measuring Intangible Capital with Market Prices," Management Science, INFORMS, vol. 71(1), pages 407-427, January.
    9. Salvador Domínguez Gil & Gema Ramírez Pacheco & Silvia Alonso de los Ríos, 2025. "Life-Cycle Cost Assessment in Real Estate Decision-Making Processes: Scope, Limits and Shortages of Current Practices—An Integrative Review," Sustainability, MDPI, vol. 17(12), pages 1-16, June.
    10. Ancuta Alina Gheorghe & Moisescu Florentina, 2017. "Study Regarding The Financial Reporting Of Intangible Assets. Case Of Romanian Pharmaceutical Industry," Management Strategies Journal, Constantin Brancoveanu University, vol. 35(1), pages 163-172.
    11. Anna Maria Biscotti & Eugenio D’Amico, 2019. "Does Equity Market Differently Perceive IC Management and Disclosure Behaviours?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(2), pages 756-775, June.
    12. Christian Nielsen & Gunnar Rimmel & Tadanori Yosano, 2015. "Outperforming markets: IC and the long-term performance of Japanese IPOs," Accounting Forum, Taylor & Francis Journals, vol. 39(2), pages 83-96, June.
    13. Yuri Biondi & Antoine Rebérioux, 2012. "The governance of intangibles: Rethinking financial reporting and the board of directors," Accounting Forum, Taylor & Francis Journals, vol. 36(4), pages 279-293, December.
    14. Marques, Mário & Pinho, Carlos & Montenegro, Tânia Menezes, 2019. "The effect of international income shifting on the link between real investment and corporate taxation," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 36(C), pages 1-1.
    15. Konan Chan & Mei‐Xuan Li & Chu‐Bin Lin & Yanzhi Wang, 2022. "Organization capital effect in stock returns—The role of R&D," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(7-8), pages 1237-1263, July.
    16. David Hirshleifer & Danling Jiang, 2010. "A Financing-Based Misvaluation Factor and the Cross-Section of Expected Returns," The Review of Financial Studies, Society for Financial Studies, vol. 23(9), pages 3401-3436.
    17. Klaus Grobys & James W. Kolari & Jere Rutanen, 2022. "Factor momentum, option-implied volatility scaling, and investor sentiment," Journal of Asset Management, Palgrave Macmillan, vol. 23(2), pages 138-155, March.
    18. Gareis, Johannes & Mayer, Eric, 2020. "Financial shocks and the relative dynamics of tangible and intangible investment: Evidence from the euro area," Discussion Papers 39/2020, Deutsche Bundesbank.
    19. J. Sarmiento-Sabogal & M. Sadeghi, 2015. "Estimating the cost of equity for private firms using accounting fundamentals," Applied Economics, Taylor & Francis Journals, vol. 47(3), pages 288-301, January.
    20. Keming Li, 2021. "The effect of option trading," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-32, December.
    21. Po-Hsuan Hsu & Dongmei Li & Qin Li & Siew Hong Teoh & Kevin Tseng, 2022. "Valuation of New Trademarks," Management Science, INFORMS, vol. 68(1), pages 257-279, January.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:ecothe:v:62:y:2024:i:3:p:389-412:n:1007. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.